Investment Greats: Ken Fisher

Published in Investing Strategy on 26 June 2009

While he learned a lot from his famous investor father, Ken Fisher has ploughed his own furrow very successfully.

Although he's the son of famous investor Philip Fisher, Ken Fisher has developed his own style, and built an impressive reputation in his own right.

Background

The youngest of Philip Fisher's three sons, Ken was born in 1950 in San Francisco, and studied forestry and economics at Humboldt State University. He then worked for his father for several years before founding the money management company, Fisher Investments, in 1979.

Forecasting

Fisher's main claim to fame is a relatively impressive track record when it comes to forecasting the market. According to CXO Advisory Group, which tracks the performance of market pundits, "Ken Fisher's forecasts for the overall U.S. stock market are right about 58% of the time, which is well above average".

Forbes magazine, for which he writes a long-running column, calculates that his public stock picks have outperformed the US stock market by about 5.7% annually over the past 11 years.

Being bearish, correctly, as markets slid in 2001 and 2002, he regained his bullishness too soon. He also called the subsequent bull market correctly, but has been accused of underestimating the extent of the current crisis. In particular, he has been criticised for being too relaxed about debt levels.

Investment Style

Fisher is first to point to the fact that being right only slightly more often than he is wrong is enough to put him in the top rank of market forecasters. Mistakes are part of the business, and the most important lesson for investors is learning how to engage with the 'great humiliator' that is the market. It's a personal challenge.

And it's a challenge that we're not designed to be good at. At our core, we are optimised for hunting and gathering, the these are the attributes we bring to investing, often 'collecting' the sorts of shares that appeal most to us. Fisher was an early proponent of behavioural finance -- trying to understand the mind games we play when investing.

In his book, The Only Three Questions That Count, he makes the case that all widely-known information is already comprehended in the share price, and that to beat the market we need to either know something the market doesn't, or simply take a different view on it. He sums it up in these three questions:

  • What do you believe is actually false?
  • What can you fathom, that other people find unfathomable?
  • What is my brain doing to blindside me now?

A key part of his approach is to first take a view on the overall direction of the market, and the sectors and categories of shares that he expects to benefit. This is more important than selecting the right shares within those sectors.

When it comes to selecting individual companies, he likes the idea of finding great businesses that are going through temporary glitches in profitability, perhaps due to migrating from one generation of product to the next. In his book Super Stocks, he pioneered the use of the price-to-sales ratio (PSR) as a tool for identifying such companies. The price-to-research ratio (PRR) is another indicator of a business that is investing in its moat.

While his father famously held businesses for the very long term, Ken is looking for shorter-term situations that will correct themselves and be sold once profitability returns to normal. Diskette maker Verbatim Corporation was a good example of this in the early 1980s, rising fifteen-fold within a couple of years.

Current positions

In the current edition of Forbes, Fisher argues that the first year of a Democrat presidency is usually good for stocks, because the market initially expects them to be a disaster and discounts stocks accordingly, and is eventually pleasantly surprised when they are not. This is partly due to the rhetoric that a Democrat candidate has to use to get elected -- "Obama says lots of stupid, scary things". But eventually, they mellow out and business goes on as usual.

He's focusing at the moment on consumer discretionary, materials, energy and industrials, and in particular on the likes of Harley-Davidson and Mattel.

Although he manages assets of $45 billion, he still finds the time to read history books and indulge his interest in redwood trees.

More: Ken Fisher in his own words

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

FrankG45 26 Jun 2009 , 6:20pm

I know Mssr. Fisher of course as he appears occasionally in the FT and I read his Three Questions books. His assertion you needn't always be right, just right more than wrong is thoroughly rational and correct. If you think about someone like a Buffett or a Soros they've both been wrong quite a lot and the media makes a to-do when they are, but both gentlemen are also right a lot. I did like his book tremendously and recommend it. He's an American and talks about American stock markets quite a bit, but he also talks about the UK and the book is intended to be global in nature and, in fact, is.

Fool1286135681 26 Jun 2009 , 6:26pm

"Forbes magazine, for which he writes a long-running column, calculates that his public stock picks have outperformed the US stock market by about 5.7% annually over the past 11 years." Its hard to argue with that.

Fool1286135681 26 Jun 2009 , 6:28pm

I like what he has to say about politics too.

Fool1286139142 26 Jun 2009 , 6:35pm

He's probably right about the first year democrat affect. Shares are heading the right way since about March. Even people who like Mr. Obama very much can probably see he's not a grand friend to businesses. But if Mr. Fisher is right it shouldn't matter.

Fool1286143111 26 Jun 2009 , 6:40pm

beating shares by 5.7% is impressive

Fool1286146024 26 Jun 2009 , 6:44pm

Phil Fisher is a known legend, but his son may be giving dear ole da' a run for his money.

Fool1286152517 26 Jun 2009 , 7:01pm

I've read Mr. Fisher in the FT and Interactive Investor and always appreciate his independent thinking

Fool1286158874 26 Jun 2009 , 7:16pm

Here's the CXO Advisory Group website referenced in the article above: http://www.cxoadvisory.com/gurus/

Fool1286162499 26 Jun 2009 , 7:16pm

I believe that Ken Fisher has been writing in Forbes for over 20 years. I've been reading his articles for several years now. While I don't always agree with him, I do appreciate his candor and honest, direct style of writing.

Fool1286165626 26 Jun 2009 , 7:22pm

I've read some of Ken's articles in Forbes as well. If only I had known about CXO and Forbes' findings on his track record, I would have paid more attention to his stock picks.

Fool1286168858 26 Jun 2009 , 7:29pm

I read Phil Fisher's Common Stocks and Uncommon Profits in business school. I had a professor that spoke of him often. He was an incredibly intelligent individual and more should follow his philosophies of researching companies and buying stocks based on potential growth, not short term profit potential. I haven't read any of Ken Fisher's books, but may now.

Fool1286169282 26 Jun 2009 , 7:32pm

The cxo web site is interesting. More than half of these chaps are wrong more than they are right. 58% seems quite respectable.

Fool1286172689 26 Jun 2009 , 7:34pm

His thoughts on presidential terms impacting market performance is interesting.

Fool1286162499 26 Jun 2009 , 7:43pm

GoAggs - Ken has written a few Forbes articles about presidential elections and the effect on markets. You can find them on the Forbes site. Here is a link to one from last year: http://www.forbes.com/forbes/2008/0519/148.html

Fool1286186216 26 Jun 2009 , 7:58pm

I think I'll pick up a copy of Ken Fisher's book, sounds like an interesting read.

Fool1286186216 26 Jun 2009 , 8:01pm

oh, you can buy the paperback for only £10.19 (vs £12.53)

http://books.global-investor.com/books/270970.htm?ginPtrCode=11128

Fool1286196411 26 Jun 2009 , 8:14pm

does Fisher still write a regular column in the UK?

Fool1286181700 26 Jun 2009 , 8:16pm

He used to write for Bloomberg Money but no more

Fool1286152517 26 Jun 2009 , 8:18pm

Yes, Interactive Investor

payote 02 Jul 2009 , 11:41pm

ken fisher an all time great?Go and say that to the increasily number of his clients who have contacted law firms to bring claims against him.just read his 2008 forbes columns.bullish untill the end to the point of being ridicule.He is not managing asset of 45 millions any longer.A lot of his former clients have left after having lost a lot and are very angry with him.His return over 7 years are at the best mediocre.(in the last 20 per cent of comparable funds).

payote 02 Jul 2009 , 11:41pm

ken fisher an all time great?Go and say that to the increasily number of his clients who have contacted law firms to bring claims against him.just read his 2008 forbes columns.bullish untill the end to the point of being ridicule.He is not managing asset of 45 millions any longer.A lot of his former clients have left after having lost a lot and are very angry with him.His return over 7 years are at the best mediocre.(in the last 20 per cent of comparable funds).

payote 02 Jul 2009 , 11:41pm

ken fisher an all time great?Go and say that to the increasily number of his clients who have contacted law firms to bring claims against him.just read his 2008 forbes columns.bullish untill the end to the point of being ridicule.He is not managing asset of 45 millions any longer.A lot of his former clients have left after having lost a lot and are very angry with him.His return over 7 years are at the best mediocre.(in the last 20 per cent of comparable funds).

payote 02 Jul 2009 , 11:41pm

ken fisher an all time great?Go and say that to the increasily number of his clients who have contacted law firms to bring claims against him.just read his 2008 forbes columns.bullish untill the end to the point of being ridicule.He is not managing asset of 45 millions any longer.A lot of his former clients have left after having lost a lot and are very angry with him.His return over 7 years are at the best mediocre.(in the last 20 per cent of comparable funds).

Fool219875657 11 Jul 2009 , 10:47pm

I can see form above "payote" has had a rough go recently. (Also a bad case of the hiccups!!), but I am receiving direct mail solicitations from Fisher Investments and would appreciate anyone who has dealt with Fisher Investments using their "Confidential Request Form". I ma most interested in the positive or negative experiences they have had using this method. As you can tell, I just don't want to begin a grinding process of sales calls everyday should I request more information now.

Fool1295738886 13 Jul 2009 , 8:51pm

Another good article from a good series, thanks. I'll be certain to pick up Fisher's latest book when it comes out.

margaret001 28 Jul 2009 , 7:18pm

On July2,2009 Payote wrote about the number of client law suits that have been made against Fisher Investments. I'd join those law suits if I wasn't afraid of losing another $20,000 to $30,000 in legal courts.

As a subscriber to the Motley Fool newsletter and a Motley fool fan, I'm truly disappointed that the Fools would award Fisher such a good review.

I don't believe that his past clients would regard his financial wisdom as one of the "greats". Fisher is no John Bogle and to include him as one of "greats" is an insult to Mr. Bogle, Peter Lynch, George Soros, Warren Buffett...etc. because they have helped a lot of people and are truly great.
Perhaps, the Fools would be wise to read the Bogleheads blog regarding Fisher Investments,Inc.

Fool290898098 29 Jul 2009 , 9:36pm

Today I stumbled across this site by pure accident. We have been clients of Fisher Investments since Feb. 2007 and we are not at all pleased with Mr. Fisher's complete lack of foresight in the months leading up to the market collapse.

In April 2008 we were contacted by our investment advisor from a local firm where we have a modest account. He advised a complete reallocation involving minimal risk and he presented convincing data to back up his reasoning for a more conservative investing approach. Needless to say we sustained a very low percentage loss in this account.

Fisher Investments never had a clue of what was just over the horizon. Every argument that we presented to Fisher Investments was dismissed as our being overly pessimistic. Even as our net worth was rapidily plummenting, no changes were made nor were there any signs of concern exhibited by Fisher. When the dust finally settled our portfolio with Fisher was down 56%.

A few changes were finally made and over the past few months we have recouped some of our loss. We feel that there will be a lot more volatility in the coming months based on the rapidly increasing national debt and rising employment with no end in sight.

Also, when confronted, Fisher denied losing clients of any consequence, contrary to what we have read here today. Just yesterday my Fisher advisor and I had a 90 minute telephone conversation centered on why we would be foolish to move our account to our local investment firm. What irks me is Fishers' continued cavalier attitude and bullish market outlook.

Fisher's "financial greatness" is rapidily diminishing; from our point of view anyway. We too are considering initiating a client lawsuit.

Incidently we are in our sixties and we feel that the investing advice we are currently receiving from Fisher is suspect to say the least.

frys867 30 Jul 2009 , 4:30am

As another Fool fan, I'm more inclined to believe Fool over a blog. In that regard, Fisher very much belongs with those other gentlemen given his track record. Certainly no one is right 100% of the time, and Bogle, Buffett, Soros and all the rest have all been wrong and famously so from time to time. If Mr. Fisher was wrong last year and including that still beat the US stock market by 5.7% over the last 11 years, that's the kind of being wrong I like. Padraig says here that Mr. Fisher is right 58% of the time. That means being wrong 42% of the time. Which is good, because no one is omnipotent. Certainly not Mr. Soros.

Fool1302795877 01 Aug 2009 , 5:13am

Have read Phil Fishers and a few of Ken Fishers books. Its good to know has the chops to back it up . . . that's a good run he's had.

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